The Crisis of Neoliberalism in Eastern Europe

The global financial crisis hit Eastern European countries harder than elsewhere. Latvia led the world with a GDP drop of seventeen percent in 2009. In the aftermath of the crisis, some observers sought to counter a widespread perception that aspects of the neoliberal growth model had exacerbated the crisis in Eastern Europe by encouraging a boom-bust cycle of massive financial capital inflows followed by a sudden stop. Yet subsequent slow growth in Eastern Europe compared to other develop countries gave rise to more and more pressing questions about the benefits of the neoliberal strategy. As countries that assiduously followed neoliberal policies have suffered through a prolonged period of slow growth, have their concerns translated into shifts in economic policy away from neoliberal policies? Or has neoliberalism remained resilient, despite the massive bust and subsequent stagnation?

Relying on an analysis of standard measures of neoliberalism produced by liberal think tanks and case studies of two important transition countries, Hungary and Poland, this paper will show that, while delayed, there is evidence of a substantial shift away from neoliberal economic policies in some countries of Eastern Europe.  The economic policies pioneered by Prime Minister Viktor Orban in Hungary and partially emulated by the Law and Justice government in Poland deviate from previous neoliberal policies by adopting a range of nationalist economic policies that contradict the premises of neoliberalism and the interests of foreign investors, and by promoting traditionalist welfare state policies, including the promotion of family values and conservative social development.